19% annual rise in mortgage lending

Mortgage lending for house purchase showed its first significant annual increase since early 2007 during July, figures have revealed.

The number of mortgages lent to people buying a home were 19% higher than in July 2008, while they jumped by 24% compared with June this year to 56,000, according to the Council of Mortgage Lenders.

The group described the increase as being significant, but warned that it may not be sustained due to the ongoing problems affecting the mortgage market.

CML economist Paul Samter said: "It's tempting to call the turn in the mortgage market at this point, and there is certainly concrete evidence that lending for house purchase is increasing. But there are still constraints affecting the lending industry's capacity to fund increased lending, as well as less consumer motivation to remortgage for the time being.

"The overall lending picture is likely to stay relatively subdued for some time, especially as the wider economy is far from robust as yet."

The housing market has shown signs of stabilising in recent months, with most house price indexes reporting price rises, but economists have warned that the ongoing problems in the mortgage market, as well as rising unemployment, could trigger a fresh round of price falls.

Earlier, research claimed recent increases in house prices were a "false dawn" and warned property values would not return to their 2007 peak for at least another five years.

The Ernst & Young ITEM Club said, while figures indicated the property market may be stabilising, the recent rise in house prices could not be sustained beyond the spring of next year.

Instead the group said it expected renewed price falls during the first half of 2010, followed by two years of stagnant prices, after which the cost of property will gradually start picking up as the wider economy strengthens and credit conditions ease. It warned that it expected it to be at least five years before house prices returned to their autumn 2007 level.